§ 1001. Members’ contributions
The organic rules shall establish the amount, manner, or method of determining any
contribution requirements for members or shall authorize the board of directors to
establish the amount, manner, or other method of determining any contribution requirements
for members. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)
§ 1002. Contribution and valuation
(a) Unless the organic rules otherwise provide, the contributions of a member to a mutual
benefit enterprise may consist of tangible or intangible property or other benefit
to the enterprise, including money, labor, or other services performed or to be performed,
promissory notes, other agreements to contribute money or property, and contracts
to be performed.
(b) The receipt and acceptance of contributions and the valuation of contributions shall
be reflected in a mutual benefit enterprise’s records.
(c) Unless the organic rules otherwise provide, the board of directors shall determine
the value of a member’s contributions received or to be received, and the determination
by the board of directors of valuation is conclusive for purposes of determining whether
the member’s contribution obligation has been met. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)
§ 1003. Contribution agreements
(a) Except as otherwise provided in the agreement, the following rules apply to an agreement
made by a person before formation of a mutual benefit enterprise to make a contribution
to the enterprise:
(1) The agreement is irrevocable for six months after the agreement is signed by the person
unless all parties to the agreement consent to the revocation.
(2) If a person does not make a required contribution:
(A) the person is obligated, at the option of the enterprise, once formed, to contribute
money equal to the value of that part of the contribution that has not been made,
and the obligation may be enforced as a debt to the enterprise; or
(B) the enterprise, once formed, may rescind the agreement if the debt remains unpaid
more than 20 days after the enterprise demands payment from the person and, upon rescission,
the person has no further rights or obligations with respect to the enterprise.
(b) Unless the organic rules or an agreement to make a contribution to a mutual benefit
enterprise otherwise provide, if a person does not make a required contribution to
an enterprise, the person or the person’s estate is obligated, at the option of the
enterprise, to contribute money equal to the value of the part of the contribution
which has not been made. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)
§ 1004. Allocations of profits and losses
(a) The organic rules may provide for allocating profits of a mutual benefit enterprise
among members, among persons that are not members but conduct business with the enterprise,
to an unallocated account, or to any combination thereof. Unless the organic rules
otherwise provide, losses of the enterprise shall be allocated in the same proportion
as profits.
(b) Unless the organic rules otherwise provide, all profits and losses of a mutual benefit
enterprise shall be allocated to patron members.
(c) If a mutual benefit enterprise has investor members, the organic rules may not reduce
the allocation to patron members to less than 50 percent of profits. For purposes
of this subsection, the following rules apply:
(1) amounts paid or due on contracts for the delivery to the enterprise by patron members
of products, goods, or services are not considered amounts allocated to patron members;
and
(2) amounts paid, due, or allocated to investor members as a stated fixed return on equity
are not considered amounts allocated to investor members.
(d) Unless prohibited by the organic rules, in determining the profits for allocation
under subsections (a), (b), and (c) of this section, the board of directors may first
deduct and set aside a part of the profits to create or accumulate:
(1) an unallocated capital reserve; and
(2) reasonable unallocated reserves for specific purposes, including expansion and replacement
of capital assets; education, training, cooperative development; creation and distribution
of information concerning principles of cooperation; and community responsibility.
(e) Subject to subsections (b) and (f) of this section and the organic rules, the board
of directors shall allocate the amount remaining after any deduction or setting aside
of profits for unallocated reserves under subsection (d) of this section:
(1) to patron members in the ratio of each member’s patronage to the total patronage of
all patron members during the period for which allocations are to be made; and
(2) to investor members, if any, in the ratio of each investor member’s contributions
to the total contributions of all investor members.
(f) For purposes of allocation of profits and losses or specific items of profits or losses
of a mutual benefit enterprise to members, the organic rules may establish allocation
units or methods based on separate classes of members or, for patron members, on class,
function, division, district, department, allocation units, pooling arrangements,
members’ contributions, or other equitable methods. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)
§ 1005. Distributions
(a) Unless the organic rules otherwise provide and subject to section 1007 of this title, the board of directors may authorize, and the mutual benefit enterprise may make,
distributions to members.
(b) Unless the organic rules otherwise provide, distributions to members may be made in
any form, including money, capital credits, allocated patronage equities, revolving
fund certificates, and the mutual benefit enterprise’s own or other securities. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)
§ 1006. Redemption or repurchase
Property distributed to a member by a mutual benefit enterprise, other than money,
may be redeemed or repurchased as provided in the organic rules but a redemption or
repurchase may not be made without authorization by the board of directors. The board
may withhold authorization for any reason in its sole discretion. A redemption or
repurchase is treated as a distribution for purposes of section 1007 of this title. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)
§ 1007. Limitations on distributions
(a) A mutual benefit enterprise may not make a distribution if, after the distribution:
(1) the enterprise would not be able to pay its debts as they become due in the ordinary
course of the enterprise’s activities; or
(2) the enterprise’s assets would be less than the sum of its total liabilities.
(b) A mutual benefit enterprise may base a determination that a distribution is not prohibited
under subsection (a) of this section on financial statements prepared on the basis
of accounting practices and principles that are reasonable in the circumstances or
on a fair valuation or other method that is reasonable in the circumstances.
(c) Except as otherwise provided in subsection (d) of this section, the effect of a distribution
allowed under subsection (b) of this section is measured:
(1) in the case of distribution by purchase, redemption, or other acquisition of financial
rights in the mutual benefit enterprise, as of the date money or other property is
transferred or debt is incurred by the enterprise; and
(2) in all other cases, as of the date:
(A) the distribution is authorized, if the payment occurs not later than 120 days after
that date; or
(B) the payment is made, if payment occurs more than 120 days after the distribution is
authorized.
(d) If indebtedness is issued as a distribution, each payment of principal or interest
on the indebtedness is treated as a distribution, the effect of which is measured
on the date the payment is made.
(e) For purposes of this section, “distribution” does not include reasonable amounts paid
to a member in the ordinary course of business as payment or compensation for commodities,
goods, past or present services, or reasonable payments made in the ordinary course
of business under a bona fide retirement or other benefits program. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)
§ 1008. Liability for improper distributions; limitation of action
(a) A director who consents to a distribution that violates section 1007 of this title is personally liable to the mutual benefit enterprise for the amount of the distribution
that exceeds the amount that could have been distributed without the violation if
it is established that in consenting to the distribution the director failed to comply
with sections 818-819c of this title.
(b) A member or transferee of financial rights that received a distribution knowing that
the distribution was made in violation of section 1007 of this title is personally liable to the mutual benefit enterprise to the extent the distribution
exceeded the amount that should have been properly paid.
(c) A director against whom an action is commenced under subsection (a) of this section
may:
(1) implead in the action any other director who is liable under subsection (a) of this
section and compel contribution from the person; and
(2) implead in the action any person that is liable under subsection (b) of this section
and compel contribution from the person in the amount the person received as described
in subsection (b) of this section.
(d) An action under this section is barred if it is commenced later than two years after
the distribution. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)